As much as the subject of ‘Technical Indicators’ equipped with the latest marketing tactics has propelled them to continuously flood the markets, it would be as much to witness the number of traders that have been disappointed by it.
We have cherry picked the top 3 most popularly used and known indicators in the Forex markets today, as follows;
1. Moving Averages (MA)
Due to the fact that Moving Averages are still labelled as a ‘Lagging’ indicator which draws the trend from past information and hence is still NOT able to take into account the occurrence that would impact the markets such as; acts of god, geopolitical risks, terrorist attacks, economic data releases or unpredictable complexities of any sort. It is a hot topic especially in online forums as it still remains questionable on how effective moving averages are for accurately indicating price action.
2. Relative Strength Index (RSI)
The RSI is categorised as an Oscillator which is most commonly used to scan the markets for divergences. When using the RSI to indicate ‘divergence’ as a sign of waning of momentum, traders should be extremely cautious because it does not necessarily signify new momentum in the opposite direction. Wilder wrote in his book (1978) that “the Index will usually top out or bottom out before the actual market top or bottom, giving an indication that a reversal or at least a significant reaction is imminent.”
3. MACD
MACD was originally created to indicate changes in the strength, direction, momentum, and duration of a trend mainly in stock's price. When it comes to the biggest Financial market of the world, which is Forex, then the original functionality may need some tweaking and may not be giving the same results as a Stocks trader would be getting from applying it. The other problem is that traders lack the knowledge or education on how to differentiate between a Trending market or Ranging market.
Conclusion
Technical analysis is one of the oldest trading concepts and it has become far more advanced with the coming of latest trading tools including smarter and more user friendly technical indicators too. However, despite the arrival of a barrage of new indicators yearly, the core assumptions of technical analysis does still remain intact, these are made of the following; history tends to repeat itself, price of financial instruments always move in trends and that the market discounts everything.
Client caution: IFM Trade is a registered business name of Intelligent Financial Markets Pty Ltd (IFM). IFM (ACN 155 185 014) is licensed in Australia by the Australian Securities & Investments Commission (ASIC) and holds an Australian Financial Services Licence (AFSL 426359). The information is general information only. Any advice is general advice only. The advice has been prepared without taking into account your personal objectives, financial situation or needs. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice. (If the advice relates to a financial product) the client should obtain and consider the Product Disclosure Statement before making a decision in relation to the product
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Japanese Yen trades just shy of 157.00 versus the USD
The Japanese Yen weakens across the board after BoJ announced its policy decision. A shortlived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. US PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.